Is the Sun Setting on Solar Stocks?

Solar stocks received a beating on Thursday, as Germany moves closer to cutting subsidy payments. Due to sizzling demand for solar modules, Germany solar industry representatives are meeting with Environment Minister Norbert Roettgen to discuss plans to limit new installations of solar panel capacity to 3,500-5,000 megawatt.

Last year, new solar installations reached a record 7.5 gigawatts in Germany. Reuters explains, “Additions in December alone amounted to 3 GW, the German network agency said, citing preliminary figures and noting that pace could spur a 15 percent cut in tariffs under the feed-in law for renewable energy from July if unabated.”

Even though subsidy cuts are likely to come in several small steps, solar stocks declined across the board. The Market Vectors Solar Energy ETF (NYSE:KWT) and Jinkosolar Holding Co. (NYSE:JKS) fell 6.3 percent and 8.10 percent, respectively. JA Solar Holdings (NASDAQ:JASO), which engages in the design, manufacturing and marketing of high-performance solar cells declined more than 14 percent on the news. The cream of the crop solar industry, First Solar Inc. (NASDAQ:FSLR), fell more than 9 percent. First Solar shares received a boost earlier this week, after David Einhorn announced he covered his short position in the stock during the fourth quarter of 2011.

According to Reuters, the solar power industry accounts for about 3 percent of Germany’s energy use, but almost half of the total 17.1 billion euros ($21.9 billion) paid for renewable energy by consumers.